Image depicting a chip illustration
Source: Protocol

US chipmakers set to receive billions in grants and tax breaks
The CHIPS and Science Act authorised subsidies up to $200 billion over 10 years

Image depicting a chip illustration
US chipmakers set to receive billions in grants and tax breaks over 10 years.
Source: News 18

This week, reports show chipmakers as rather excited to get massive subsidies set by US President Joe Biden as he went on to sign a bill allocating $52.7 billion into the sector. Heads of firms such as HP, Intel, Micron, along with Lockhead Martin and auto industry heads as they are hoping to see the a long lasting shortage finally ending in chips.

Accumulatively, this new CHIPS and Science Act is authorising a maximum of $200 billion in subsidies in the span of a decade, provided the country decides to continue the investment. It is also being referred to as the Creating Helpful Incentives to Produce Semiconductors for America Act. The main aim for this is to push US over China and others in the worldwide competition to emerge as the lead in the chipmaking sector.

The moment it is set in place, the Department of Commerce would determine the regulations for how these subsidies would be distributed. Owing to advanced semiconductor manufacturing that is required for this that needs ample resources have struggled to provide proper funding. This new Act would place the federal government to finally avert this limitation.

The immediate result of the Act:

Already, we can see some chipmakers coming up with long term investment plans as Biden gives his signature. This includes Qualcomm buying semiconductor chips worth $7.4 billion in the coming six years through a factory in New York. Alongside, Micron made a larger commitment to allocating $40 billion for the funding of productions, which alone has the potential to power up the American market share to 10% from 2%.

Along with federal contributions, the chipmakers would have the chance to to get a 25% investment in tax credit by means of this bill. This marks an additional $24 billion giveaway for the sector with the grants. All this while, we saw US lawmakers considering corporate subsidies of this size to be rather counterintuitive to making sure of an unbiased base. However, they also assume how it is essential to avert national security dangers, and consider issues surrounding global supply chain through the investment of billions into the industry.

Evidently, this could adequately aid in placing the US at the top of the competition, though there exist certain indications that the market may require the thorough tracking of progress to make sure of ample earning on this step. The move from the president arrives following the Chinese chip sector moving to ‘chaos’ with the arrest of top chip industry executive of China on charges of corruption.